Creating Shared Value
The kind of shared value that will generate enduring economic benefits for the company when at the same time adding momentous value to society by addressing its basic needs and challenges. The authors rationalized this idea by pointing out the fact that business & society have grown further apart, tangled up in misconceptions such as business as the cause of many societal problems, especially environmental & economic. In the same way, business believes providing societal benefits will hurt their bottom line.
In fact the real problem resides in the fact that business has long been locked in with an outdated and narrow concept of value creation; the ones that mainly focus on profits and short term performance over the long term outlook. Their major mistake is to overlook all other contributing factors such as their customers’ needs, the depletion of the resources they use or the reliability of the supply chain they use, etc, that could help ensure their financial success and strengthen their corporate image.
The authors note that companies are still trapped with the notion of “social responsibility” but they don’t address societal issues as the core element. Kramer & Porter stress that share value is totally different than philanthropy or social responsibility; rather it is new way to achieve economic success and that capitalism is the greatest mean for companies to accomplish the above purpose by meeting human needs, attaining efficiency and creating jobs. The authors suggest capitalism and corporations’ role be redefined to help harness businesses’ full potential of meeting society’s broad challenges.
They believe this will drive the next wave of innovation and productivity growth in the global economy. The authors moved on to define the roots of shared value which they state are closely interwined between the competitiveness of a company and the community around it. The idea is that when a business succeeds, it should positively affect its immediate community; they depend on each other to prosper. For example; a successful business creates jobs, wealth and opportunities for the surrounding area residents.
In the same way, business needs residents to have income to spend on their goods or have the required training/education to work for the company. According to the authors, many big corporations have already embraced this new concept of creating shared value and are ripping its benefits along the way while helping distant societies to prosper in their own way and at their own pace but enduring. First of all, I thought this article is very well written and very easy to read, filled with many convincing evidence to support their presented arguments.
This subject caught my interest right away because for the longest time I believe big corporations not only have the means but also the duty to give back to society where it conducts its business. I have watched documentaries showing big corporations operating their businesses in third world countries where environmental regulations are nearly non-existent, took advantage of this void by polluting nearby local ocean shores and river streams (mostly in Africa, with corporations such as Coca Cola, Nestle or big gas companies), leaving behind nothing but desolation.
And these are companies that would swear by their commitment to social responsibility & environment initiatives. This is probably the reason society often puts the blame on corporations for their problems, just as mentioned by the authors. I believe capitalism has lost some of its splendor and from the action of few bad apples. I don’t think capitalism is bad if carried out in the most responsible fashion and with a noble purpose. I’m in total agreement with the authors about society and business competitiveness being closely interwined.